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HomeMy WebLinkAbout2007-06-25 WUCFD MINUTESWATER UTILITIES COMMUNITY FACILITIES DISTRICT (APACHE JUNCTION WATER COMPANY) CITY OF APACHE JUNCTION, ARIZONA REGULAR MEETING JUNE 25, 2007 The regular meeting of the District Board of the Water Utilities Community Facilities District (Apache Junction Water Company), City of Apache Junction, Arizona, was held on June 25, 2007, at the Apache Junction City Council Chambers pursuant to the notice required by law. CALL TO ORDER Chairperson Insalaco called the meeting to order at 7:00 p.m. ROLL CALL Board Members Present:Chairperson John Insalaco Vice Chairperson R.E. Eck, Jr. Mrs. Robin Barker Mr. Rick Dietz Mr. Jeff Serdy Mr. Joseph Severs Mr. Chip Wilson Staff Present:Kathleen Connelly, District Clerk John White, District Finance Manager Doug Dobson, Utility Director Frank Blanco, Water Director Keith Lewis, District Finance Director Others Present:Hazel Randall, District Admin. Asst. Greg Swartz, Piper Jaf fray APPLICATION FOR FINANCIAL ASSISTANCE FROM THE WATER INFRASTRUCTURE FINANCE AUTHORITY OF ARIZONA FOR WATER SYSTEM Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 1 of 27 IMPROVEMENTS )District Finance Manager John White briefed the board on the item.He commented Mr. Swartz of Piper Jaf fray was there to speak to the board.He has worked in the water and wastewater field for a couple of decades.He gave brief work history of Mr. Swartz.He will give some background on debt issues, how municipal debt works, and how the water district can use that debt.There is the possibility the district may need to incur additional debt with some of the capital needs. Mr. Greg Swartz addressed the board.He stated they were asked to examine alternatives to finance some improvements to the water infrastructure operated by the district.The assessment report stated to serve the current and projected needs of the district it will need to connect into the Mesa system through an interconnect and design and finance the construction of a surface water treatment facility. Vice Chairperson Eck suggested he give them a brief explanation as to why the district needs to do the interconnect and the treatment plant. They have a number of new board members. Mr. Greg Swartz stated he is just a finance guy.He can answer questions about finance only. Vice Chairperson Eck asked how strong the district is as far as a bonding district. •Mr. Greg Swartz stated as a stand alone entity that would issue its own bonds, the district is what is known as an investment grade issuer.If they were to issue bonds, they would meet with relatively good reception on the part of the investor. Vice Chairperson Eck asked if they have to issue bonds with so much of the district money. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 2 of 27 Mr. Greg Swartz stated the markets like to see a couple of things when bonds are issued. They prefer you mix bonds with your own cash.The markets like to see a water and wastewater utility invest as much of its own cash into the capital infrastructure as possible prior to issuing debt. Vice Chairperson Eck asked if there is a median percentage. Mr. Greg Swartz stated it varies year to year, but generally the agencies that have rated them investment grade would like to see anywhere from 20% to 40% of the district's infrastructure financed with cash.As a rated entity, the district is coming upon a period that is a classic small business growth cycle where the customers will outstrip the district's capability at some point.It is the least advantageous time for the district to go out on the open market for its own debt; when they have a large capital debt and they know it is coming but they do not have the revenue stream yet. He recommended they rely upon the Water Infrastructure Finance Authority of Arizona.The project loans are as small as $2,368 to as large as $463,000,000 to Lake Havasu City to build a wastewater treatment system.They offer the best terms and conditions.The open market interest rate would probably be 4.5 to 4.75%.It would probably be a 3 to 3.25% interest rate with the Water Infrastructure Finance Authority with no closing costs other than local closing costs.Legal fees are also lower.His advice is if they have looming capital needs, the Water Infrastructure Finance Authority is a viable course. Vice Chairperson Eck commented it is back to the old street bonding issue of how the costs of materials keep going up.They need to get a project planned and get them going now.It is better to pay 3.5% now then to wait 5 years and pay more for materials. Mr. Greg Swartz stated the interest rates are below the increasing cost from inflation.If they try to do what needs to be done with cash, paying as you Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 3 of 27 go, you would most likely not be able to set aside enough cash at any given time to construct these improvements.A lot of communities like to avoid debt.If you avoid debt at all costs, it ends up being more expensive.It is a means of insuring intergenerational equity so that users 10 years from now are paying the same amount of users of today, rather than placing the burden on today's users; the debt is placed on everybody. Everyone pays their proportionate share.Pay as you go in the current environment simply does not work.He looked at the district's financial status and although things are tight, there is some room for additional debt.He described the Water Infrastructure Finance Authority two -stage process. Vice Chairperson Eck asked if they can do conceptual plans. Mr. Greg Swartz stated they can.The district is ranked in the fundable range by the Water Infrastructure Finance Authority.He continued with the description of the two -stage process.He recommended the district go to the loan application stage and submit the application.Nothing is binding on the district's part.Once the loan is originated with them, it is like a line of credit. The three projects that have been submitted are the Mesa interconnect, a planning and design of a surface water treatment facility, and groundwater monitoring.This would translate into one construction loan for 20 years at an interest rate of about 3%, and a planning and design loan with an interest rate either at or below 1.5% for a 3 year term.The latter can be converted into a construction loan with no principal payments until they determine if they are going to proceed with construction or turn it into a 20 year loan and do nothing with the planning. and design. Mrs. Barker asked what the total is that they are looking at. Mr. Greg Swartz stated the interconnect is $4.5 million, the planning and design was Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 4 of 27 rounded up to $1 million, and the groundwater monitoring was rounded up to $1 million or $500,000. District Finance Manager John White stated he believed it was submitted at $500,000.There is another $500,000 for the design of the Mesa interconnect. Vice Chairperson Eck commented they are asking for $500,000 for groundwater monitoring. District Finance Manager John White stated that is for continuous chlorine monitoring.He believes it is actually shown in the budget as $200,000. Mrs. Barker stated they have a million for the water treatment facility and $4.5 million instead of $5 million for the interconnect.They have $1 million above that for half and half. Mr. Greg Swartz stated he does not have the budget in front of him but he believes the interconnect is $4.5 million.There is a million for planning and design and $500,000 for the groundwater monitoring. Chairperson Insalaco commented the water treatment plant is not in this. Mr. Greg Swartz stated it is not in there yet.The $1 million is intended for the planning and design of it.It is better to round to the nearest $500,000 with the Water Infrastructure Finance Authority.It does not hurt to take the line of credit to the largest amount they can. District Manager George Hoffman asked him to talk about a scenario where the district needed to build a treatment plant and might be looking at 8 digit numbers for borrowing but would not have the revenue stream for several years hence.There would be no payments until 2010. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 5 of 27 Mr. Greg Swartz stated they are in a classic position that a lot of communities are finding themselves in around the state.They know they have growth and need to meet the demand.They cannot build the infrastructure the day they move in.They have to build the treatment capacity, make sure the transmission lines are in place, and have the developers make sure the distribution lines are in place as they are needed.There will be fairly significant upfront capital costs with existing users expecting to pay for that growth component.It can be handled in a number of ways, such as impact fees. District Finance Manager John White stated this is a separate district and it does not have impact fees.They treat their connection fees in a similar manner. Mr. Greg Swartz stated this can be addressed in a number of ways.If the project is intended to service the area south of here, they can rely on the creation of another community facilities district intended to finance growth.It is not like the community facilities district they serve as board members on.The city council would serve as board members and it would be principally created to insure that those future residents were paying for their infrastructure requirements.Instead of revenue, they would form the district and use special assessment bonds or general obligation bonds issued by the district and secured by the land. The land being developed could serve as security for the transaction. District Manager George Hoffman commented he thought there were limitations on the ability to lien state land. Mr. Greg Swartz stated if the land has been acquired and is going to be developed, they would be looking at the part that has been sold. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 6 of 27 District Manager George Hoffman stated he thinks they will have to look at the transaction document carefully.He is not sure that the developer has actual title to that land until a whole bunch of things are done.He is 99% sure that they do not own that land today, even though there was an auction and $58 million was spent. Vice Chairperson Eck asked if they would be building the same size plant for the system regardless of the system.The interconnect would be a back-up if we had our own plant, or would the plant be 5 times larger to build that southern section. District Manager George Hoffman stated they are looking at building the interconnect first and then have some close discussion with the state land department about the phasing, disposition, and the release of those subsequent parcels.His question was how big to build it and when. Vice Chairperson Eck commented if they had a choice they would build the treatment plant and would not do the interconnect. Mr. Greg Swartz commented about the land being owned.He believes the land is held by the developer for eventual resale to individual homeowners, in which case that structure would work.A second alternative is to have the developer finance the improvement through a public/private partnership.They have a vested interest in insuring that water would be provided.They would finance the improvements up front.If they are given the choice, they would want to be a taxpayer paying property taxes through a community facilities district for the infrastructure, as opposed to being a developer and borrowing at prime rate to build the facility.They want to be able to go for the tax exempt money to the extent that the option is available to them.They are going to prefer that.If that option is not available to them in your time frame, then the classic response is a public/private partnership where the Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 7 of 27 developer is financing: the improvements with the understanding thatithey are going to be publicly owned. Mr. Dietz commented he was talking about putting a lien on the property with the first option of assuming the landowner has title to the land. Mr. Greg Swartz stated that is correct. Mr. Dietz asked if that is repaid through property tax. Mr. Greg Swartz stated that is one of two means of payment.There is a property tax or special assessment.They work along the same lines.The underlying security is the value of the land. Vice Chairperson Eck commented he is concerned with the timing in thathe would like the treatment plant and water ready to go-before_any-dirt is moved:down south.Another company has a water main running in front of that property.It is considered our service area, so they have to prepare themselves to have adequate supplies of water for construction and such.The day a fire hydrant is put in place, it should be.our -fire hydrant. Mr. Greg Swartz stated he is not familiar with the phases that will occur in the future.The classic response by most:communities in this -circumstance is the community is in the. utility -business.It has the authorityto be -a,direct provider rather than -having the arrangement that is here in Apache Junction.It is classically financed by sales tax, where the taxes-are:pledged-to a financing that is used to build the future capacity:today rather than waiting until it is too late. Vice Chairperson Eck asked if that:is .a utility sales tax, Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 . Page_Vof 27 Mr. Greg Swartz stated most communities are in the utility business.They do not have a community facilities district operating the utility.They do financing with a sales tax pledge to build a future capacity for future residents.Essentially there was no revenue stream to pledge. Vice Chairperson Eck commented that is the total city sales tax. Mr. Greg Swartz stated that is correct.It is an alternative but also comparison to what the response is on the part of other communities.There are essentially three ways:community facilities district, developer, and sales tax. Mr. Dietz asked if they could do a study on the connection fees since they cannot do development fees, and if connection fees could go towards building a facility. District Manager George Hoffman stated staff has recommended that and it is subsequently in the budget. Mr. Dietz commented there is money in there for it.He asked if that would be a revenue source to repay the debt. District Manager George Hoffman stated they will have to have a debt instrument first before they get the revenues in. Vice Chairperson Eck asked if they could create one when they do the Mesa interconnect, and then start paying that debt with what Mr. Dietz is suggesting, so that when they do the treatment plant they are not busted from any other source of revenue. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 9 of 27 District Manager George Hoffman asked him to repeat that. Vice Chairperson Eck commented if they had another pot of money that they were using to pay that debt and they were not quite as high on our connection fees, they could raise the connection fee to help pay that interconnect fee rather than use the other source of revenue. District Manager George Hoffman stated he is not sure what other source of revenue he is referring to. Vice Chairperson Eck commented they could say they had $5,000,000.They could use a connection fee to pay the interconnect with Mesa rather than touching the $5,000,000 at all, if they could come up with enough connection fees. District Manager George Hoffman stated they would have to look at what that revenue stream would generate. Mr. Greg Swartz commented connection fees are the most difficult revenue stream to pledge. Vice Chairperson Eck commented it is because they have no control over them. Mr. Greg Swartz stated it is essentially a one -time -revenue that may or may not occur. Vice Mayor Eck commented we would have a difficult time doing a city tax as only about 30% of the district is within the city limits. Mr. Greg Swartz commented the communities have been leveraging their connection fees but invariably it involves an additional pledge of the re -occurring Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 10 of 27 revenue.They can pledge their connection fees to a financing, but somewhere in the background is a re -occurring revenue stream, either system revenues or sales tax. District Manager George Hoffman stated as far as holding other monies in reserve, he thinks one of the things they will bump up against is the debt coverage ratio. Vice Chairperson Eck commented he does not fully understand that one but he knows that could be an issue. District Manager George Hoffman stated he would have to explore that. Vice Chairperson Eck commented it is good information, but it is still confusing ten years later. Mr. Greg Swartz stated debt service coverage tells them that if they have $2 million of gross revenues, which are all the revenues coming in, and they have $800,000 of operating expenses, that leaves $1.2 million of net revenue.The net revenue can support $1 million worth of debt service.The $1.2 million will support $1 million.It is in effect 1.2 times coverage. Vice Chairperson Eck asked if there is a maximum percentage they can make. Mr. Greg Swartz stated they are currently relying on their loan with Water Infrastructure Finance Authority to set their coverage and that is 1.2 times coverage.It is $1.20 of net revenues for every dollar of debt service. Vice Chairperson Eck commented it is about 20%. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 11 of 27 Mr. Greg Swartz stated that is correct. City Manager George Hoffman stated there may be a lot more questions later.They have some capital debt items contemplated in the budget.It was his thought that they might have some general interest on how they are going to tackle these. DISCUSSION ON PROPOSED DISTRICT BUDGET FOR FISCAL YEAR 2007-2008 TO INCLUDE PROPOSED RATES, FEES, CHARGES AND HOLDING PERIODS )Chairperson Insalaco asked. what a holding period is. District Finance Manager John White briefed the board on the item.He stated a holding period is the number of months that they would hold a deposit to determine whether the customer would be eligible or not to have their deposit refunded.He will, not be discussing rates tonight.He is presenting the initial look at the budget and there will be some overlapping infrastructure items in the budget.They have included the recommendations from Damon S. Williams in the budget; most involve the Central Arizona Project allotment.It was recommended they secure a water rights attorney and that is roughly estimated at $30,000.The Mesa Interconnect is in the budget for about $4.5 million for construction and $500,000 for the design.They are introducing the prospect of additional borrowing and a package treatment plant in this budget. Water Director Frank Blanco stated the issue has come with the arsenic treatment facility and the wells in general.The two dependable wells are #5 and #6.There have been some problems with the way they are operating and they still have open issues on them.They are working with the contractor and engineer to get those issues resolved.The peak demand is at 1.9 million gallons per day. The wells combined capacity is less than that, putting the Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 12 of 27 district in -a situation where we need to take water:from -Arizona Water and Mesa to meet the communitydemands.The potential of having 'a package plant'that would treat 2 million gallons per day.is -something they neecLto be consideringin:terms of how they approach the installation of that facility.The idea is to use. it as a modular facility.They can place it on the property and ultimately built a- treatment plant.They .would have the ability to deliver water, that is needed by the customers currently.It is an. option that needs to be considered. Vice Chairperson Eck stated it is a good option. Mr. Dietz agreed.He asked why it was not included in -the Water Infrastructure Finance Authority loan. Water Director Frank Blanco stated -it was one of the technologies that Damon S. Williams lookecLat.It was not one of the top 3 recommendations,Their approach was for what could. be used for a permanent facility. He is offering the option of having the package plant in place early and then having the ability to move.the:plant, since it is portable, and possibly using it as a centralized arsenic treatment plant.This -plant .can treat arsenic as well as surface water or groundwater.. Vice Chairperson Eck asked who makes them, Water Director Frank Blanco stated:there are several vendors out there.He does -not want to identify them; he would prefer .to have a consultant help them with the selection process. Vice Chairperson Eck commented he is saying thatithey could ultimately tie in down on district property and almost produce the waterthat:is necessary.A key issue with him is how to service the area south of the freeway,.They are talking about having to put Water Utilities Community Facilities District Meeting Minutes of June 25;i2n7 Page 13 of 27 mains under the freeway that are extremely expensive.If they have this package plant that acts like a regular treatment plant, like the line on Idaho that is a transmission line, he wondered if there was a way they could keep the water south and make that a distribution line rather than a transmission line. Water Director Frank Blanco stated that is a good question.There was some modeling done by Damon S. Williams on that.Their recommendation was to keep the system the way that it was with a transmission line.However, he does not know if they looked at the possibility of a source down south. Vice Chairperson Eck asked if they are okay with Well #5 if they shut off Well #6.They do not have an arsenic problem there, just like a TDS. Water Director Frank Blanco stated the arsenic in Well #5 is low.That is the best water quality that we have. Vice Chairperson Eck commented they could almost have two water supplies.He is thinking about the cost of putting a main under the freeway.As we grow, we will grow south. Water Director Frank Blanco stated it is something they should look at. District Finance Manager John White gave a powerpoint presentation on the budget.They need to make some policy decisions on the funding of the infrastructure.His presentation included groundwater, safe yield and recharge credit funding. Vice Chairperson Eck commented he would like a professional opinion on getting recharge credits; if they should keep going or at what point they stop.He does not know if the district counsel can help them with that. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 14 of 27 Mrs. Barker commented it looks like it may phase out. District Finance Manager John White stated with respect to incentive recharge, it very likely will.They are also in the third year of a ten year agreement with the sewer district for the purchase of their recharge credits.The credits can be applied to offset the replenishment tax.He briefed the new board members on the history of the district. Vice Chairperson Eck asked him to explain the difference in cost between purchasing water from Arizona Water to pumping 1,000 gallons from Well #5.It used to be 39 cents per thousand. District Finance Manager John White stated it may have gone up a little.It is probably closer to 39 cents per thousand gallons from Well #5 than it is to the $3.63 per thousand we pay Arizona Water currently. Vice Chairperson Eck commented that is just killing the district. Mrs. Barker commented it is supply and demand. District Finance Manager John White stated by comparison, Mesa, through the wheeling agreement, is now asserting that the district owes $2.62 per thousand in charges for a monthly base rate.That is for what was delivered in May.The options for expanding the water resources are to hire a water rights attorney and the Mesa interconnect. Vice Chairperson Eck commented that he and Frank have a common ground.They both know the person responsible for that and they will get a cut and dry price in the end. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 15 of 27 Chairperson Insalaco asked what a water rights attorney can do for $30,000 and do they have someone in mind. District Finance Manager John White stated Frank has been in discussions with a firm. Water Director Frank Blanco stated he has been talking to Bill Andger.He was recommended through Kay Bigelow.He has given the district a pay schedule based on the time that he works on the project.He has also given the district a letter with the prices on it and the district has given him a scope of what he is expected to do for the district.There is a lot of competition out there for the water; it is important to get this person on and get him on early.The advantage to having this attorney is he already has lots of connections in that realm.He will not be learning everything from scratch.He should be productive for the $30,000 he has so far quoted the district.If there is additional work, it would be more money.At that point they would go back to the board and state exactly what is needed. Chairperson Insalaco stated he is not against this; he just wondered what could be accomplished for $30,000.It sounds like a lot of money, but it is not when you consider what he can do for the district. District Manager George Hoffman commented he would be gaining legal rights to other sources of water.Groundwater is increasingly limited as a resource.They cannot just sink wells and suck out all the water they can pull out.They only have 2,900 plus acre feet of Central Arizona Project water.As we grow to the south, they need to have a legal source of water to provide. Mr. Serdy asked if this would help us in fighting Mesa from crossing the county line, once they see we are doing this. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 16 of 27 District Manager George Hoffman stated he thinks the ability for the district to demonstrate that this community can provide for the basic infrastructure for growth is the most powerful and fundamental protection we can have for the growth corridor. commented if we got could get issue. Vice Chairperson Eck he had a councilmember tell him that he did not care water from Mesa, as long as we could show that we the water delivered to that area.That is the biggest Mr. Dietz commented he has heard there are some Indian reservations that have quite a bit of water that is available.The water rights attorney can go negotiate with them so that we can purchase it as additional water. District Manager George Hoffman stated water will be the next oil or gold for Arizona. The prices will go as they have done for gasoline.The flip side, the discussion of water conservation and gray water reuse and all those things become very important.It will be how they can stretch that gallon of water that they are paying a premium for into so many households. Vice Chairperson Eck stated they have $50,000 for conservation. District Finance Manager John White stated another challenge is safe yield, a groundwater requirement.Starting in 2010, they will need to put back into the ground a gallon of water for every gallon removed.They still have agreements with the sewer district to build up recharge credits.The budget includes an ever-increasing amount for the replenishment tax.Arsenic treatment and renewal is an ongoing problem, along with lost and unaccounted for water. Vice Chairperson Eck asked where they were now at percentage -wise. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 17 of 27 Mr. Dietz stated they are just under 15%. Vice Chairperson Eck stated they are still too high.They have to find that water.He commented he will talk with Frank as he thinks he knows where it is. District Finance Manager John White stated there is also the package treatment plant and modifications that need to be done to Well #6.There is no firm estimate yet; they may need another $250,000 to make the project work. Mr. Dietz -asked if they will be reimbursed by the contractor since this was their responsibility.They sold us.a package that was supposed to work for the money that was put into it thus far, and it has done nothing but fail. District Finance Manager John White stated that is a matter for the district counsel, but he would think there might some legal recourse, but he is not sure to what extent they would be able to recover monies. Mr. Dietz commented there had better be some legal recourse. Vice Chairperson Eck commented all these consultants came out when the arsenic came out and said they had the best plan.Half of them did not even know if they worked right, and that is what we got. District Finance Director John White stated the groundwater updates are the continuous chlorine; there is also a water conservation team.In the future, after June 2008, they will need a security system, a well site to the south, Well #8 will need arsenic treatment at some point, the line placement at San Marcos, and additional Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 18 of 27 storage capacity as the system grows.They need a capital facilities program to plan for the financial needs. Chairperson Insalaco stated they would need land for the additional storage. Water Director Frank Blanco stated the only place they do have land is at Well #6.It is north of the existing storage site.He is not certain but public works may have plans for that particular piece of land. Mr. Dietz commented public works may not be there either. Water Director Frank Blanco stated they will need land somewhere. Vice Chairperson Eck commented the government mandates on arsenic treatment irritate him.They mandate them but do not give any funds to take care of it. Mr. Dietz commented the capital facilities fees collected thus far are on page 12 .of the introduction.The accumulated reserve at the end of 2004-2005 was $1,745;017.In 2005-06 we accumulated $76,272.It is showing we ended up with, $860,622, which is minus $961,667.He asked where that went.. District Finance Manager John White stated they pulled out $400,000 last May for the emergency situation. Mr. Dietz commented he thought that $400,000 was all that had been authorized to come out of the capital facilitiesplan. District Finance Manager John White stated they also expended some on the arsenic treatment plant.That has since been replenished.That is how it jumped Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 19 of 27 up to $860,000 and they are projecting another $200,000 this year.That should bring it back up to $1.7 million. He asked if they pulled out another $560,000 for the arsenic treatment. District Finance Manager John White stated he could get the figures.He does not have the exact amount in front of him. Vice Chairperson Eck commented they will have to look every year; the arsenic treatment will have to be passed down to the end user.They will have to look every year at a possible rate increase. Mr. Dietz commented if they have $1.3 million projected in capital facilities by the end of the year, and if the sale of the land goes for $5 million, they would have $6.75 million set aside for capital projects.He continued with line item 15 for the attorneys.They currently have $50,000, but if they put aside $24,000 for Kay and $30,000 for the water rights attorney, it needs to be readjusted to $54,000. District Finance Manager John White stated it would need to be.That was a routing issue. Mr. Dietz commented they had been talking earlier about the actual revenues for 5/31/07 versus the projected.He asked if that will mess things up because of the differences in them. District Finance Manager John White stated for May through the projected those are estimates. He did not look at the low dollar amounts as closely as he should have.It might affect us one way or another, but it should not significant. Mr. Dietz requested it be corrected. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 20 of 27 District Manager George Hoffman stated he did not understand the question or the answer on that issue. There was general discussion on the issue. District Manager George Hoffman stated if they presume that the year-to-date numbers are accurate, then there would be no instance in where the actual year end would be less than that. District Finance Manager John White stated that is correct.The projected figures were done prior to the May figures being finalized.He underestimated what the year end would be and it was surpassed by the May actuals. District Manager George Hoffman asked if those would be adjusted. .District Finance Manager John White stated they will be He will be using the actual expenditures through June 30 when they do final budget adoption. Chairperson Insalaco asked if they would be getting that updated information. District Finance Manager John White stated they would. Vice Chairperson Eck commented usually the accurate volume takes care of itself as they are selling more water and the infrastructure is paying for itself.There is no emptiness of property in-between.They are pouring in more volume because they are selling more water in a dense area.If they build an industrial park and every space fills up, they will create more revenue from that area.It does us no good if they go over their 1.9 the way they are now.They Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 21 of 27 are only making 25 cents above due to the wheeling agreement. He asked if that is accurate. District Finance Manager John White stated that is correct.The district is not making any marginal profit. Vice Chairperson Eck commented they should be making near 20% on their water.If they could make 19% it would be great.They need to get moving. Mr. Dietz commented under tab five, line 39 for contingency, there is $310,765 in last year's budget and nothing in this year's contingency.He asked if they would be having a contingency fund this year. District Finance Manager John White stated there was no money to put into contingency with all the money that is in capital this year. Mr. Dietz asked if under capital outlay, other machinery and equipment, the money there is for the package plant, for the groundwater monitoring upgrades and equipment. District Finance Manager John White stated that is correct. Mr. Dietz commented that is in the budget for purchase this year. District Finance Manager John White stated that is correct. There was general discussion on the other major projects that had been funded in the budget that had been previously mentioned. Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 22 of 27 Vice Chairperson Eck asked if they would be pushing against the line that is coming down now if they put the package plant on that property. Water Director Frank Blanco stated it would be a similar installation to what they had before. Mr. Dietz commented it would be the same thing that they used for an emergency. Vice Chairperson Eck commented that there is no water.They would have water.He asked if they would just shut everything else off and turn the package plant on and just reverse flow. Water Director Frank Blanco stated theiplan had been: to fill -the tank at booster station #2 and from there it would be pushed over to boosterstation #1. With the plant they have the flexibility of running the plant as many hours in the day as-they.want and running the wells also. They have the option of either one :or both.It:does:not have to operate 24 -.hours a day Vice Chairperson Eck commentedthat everything would-be heading south.They have a lot of water pressure'_down:by the sewage treatment -plant.He asked if they could- hook- this up there and still pump against that:heacL Water Director Frank Blanco stated it .pumps directly to the -tank at boosterstation Vice Chairperson Eck asked where booster station #2 is located. Water Director Frank Blanco stated that is the Baseline site. Water Utilities Community Facilities District. Meeting Minutes of June 25,2007 Page 23 -of :27 Vice Chairperson Eck commented they would be valving off some place else to keep the flow from coming down.He thinks it is a great idea and should save them a lot of money.He asked how much it would cost to produce 1,000 gallons through that tank. Water Director Frank Blanco stated he has not run the numbers on that.He will need to do so. Mrs. Barker asked .when final adoption of the budget:milLbe, District Clerk Kathleen Connelly :stated it isIdueno later than October Mr. Dietz asked -when the tentative budget is due. District Clerk :Kathleen Connelly stated it needs:to -be done by the fifteenth. District Finance Manager John White stated it has to be done by July 15, which is a Sunday. Chairperson Insalaco commented it must be done by July 9. District Finance -Manager John White stated that is correct-or July 3.They were looking at July 9 but it is up to the board.That discussion is -the next agenda -item. DISCUSSION ION DATES, TIMES AND LOCATIONS FOR CONSIDERATION OF TENTATIVE AND FINAL BUDGETS )District Clerk Kathleen Connelly stated they already have :a special meeting:scheduled in their city -council capacity for July 9.It would beisimilar to Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 24.of 27 what they are doing tonight, with budget/budget.They could do the same that night. Mr. Dietz commented it would be work sessions. District Clerk Kathleen Connelly stated it is an off Monday. Mrs. Barker stated it would be tentative budget adoption for both. District Manager George Hoffman stated if the board were interested they could do some small group discussion and immerse themselves in the line items and go through the history and background. Mr. Dietz commented he thought they were going to do that prior to this meeting.He had gotten a call from Hazel to set up a meeting. District Manager George Hoffman stated by giving them the option of doubling it up, they can get it out for them and have group discussions, so they reversed the order.They can still do both.He thinks it would be a good idea.There are still some board observations that need to be reflected in this. There was general discussion on when there would be tentative budget adoption and that all of the items would be filled in by that time. District Finance Manager John White stated the community facility district laws are somewhat quirky compared to the city.The city budget has to be adopted no later than the third Monday of July.The district is July 15.The district's budget can also be raised following the adoption of the tentative budget. Water Utilities Community Facilities District Meeting Minutes of June 25, "2007 Page 25 of 27 Mr. Dietz asked why the tentative budget has to be adopted by July 15 but the final not until October. District Clerk Kathleen Connelly stated it is state law. There was more general discussion on tentative budget adoption. District Clerk Kathleen Connelly stated if they do not take advantage of July 9, with the council also meeting that night, then somewhere between July 9 and July 15 they would have to have a special meeting.It would be similar to what they did tonight. District Manager George Hoffman asked Mr. Wilson if that would work for him. Mr. Wilson stated he could be here until about 5:30 p.m. There was general discussion on their being able to do two budget meetings in one night and what motions were needed at this time. District Clerk Kathleen Connelly stated they only need to give them a clue as to when they want the final budget adoption, and that could be done on July 9.Tonight they need to give the date for tentative adoption.On July 9 they will be doing final city budget adoption and tentative water district budget adoption. ADJOURNMENT )Chairperson Insalaco adjourned the meeting at 8:15 p.m. ACCEPTED THIS 1ST DAY OF OCTOBER , 2007, BY THE CHAIRPERSON AND DISTRICT BOARD OF THE WATER UTILITIES Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 26 of 27 COMMUNITY FACILITIES DISTRICT (APACHE JUNCTION WATER COMPANY), CITY OF APACHE JUNCTION, ARIZONA. SIGNED AND ATTESTED TO THIS 1ST DAY OF OCTOBER , 2007. f n S. Insalaco Chairperson ATTEST: Kathleen Connelly District Clerk WATER UTILITIES COMMUNITY FACILITIES DISTRICT MINUTES CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the regular meeting of the Water Utilities Community Facilities District of the City of Apache Junction, Arizona, held on the 25th day of June, 2007.I further certify that the meeting was duly called and held and that a quorum was present. Dated this 30th day of August, 2007. Kathleen Connelly District Clerk Water Utilities Community Facilities District Meeting Minutes of June 25, 2007 Page 27 of 27